Sondrel Plc Regulatory News (SND)

6 Dec 2006 07:02

Sanderson Group PLC06 December 2006 FOR IMMEDIATE RELEASE 6 DECEMBER 2006 SANDERSON GROUP PLC Preliminary Results for the year ended 30 September 2006 Sanderson Group plc ('Sanderson' or 'the Group'), the software and IT servicesbusiness specialising in commercial markets in the UK and Ireland, announces itsPreliminary Results for the year ended 30 September 2006. Sanderson providessoftware and IT services to businesses with annual revenues between £5 millionand £250 million. Key Points • Revenue of £16.15 million (2005: £15.46 million) up 4.5% • Operating profit* of £3.13 million (2005: £2.91 million) up 7.6% • Statutory operating profit of £2.17 million (2005: £1.27 million) • Improvement in gross margin to 84% (2005: 80%) • Recurring revenues 55% of total revenue (2005: 53%) • Proposed final dividend of 1.5 pence per ordinary 10 pence share making a total for the year of 2.6 pence (2005: 2.5 pence) up 4.0% • Sanderson Retail Systems acquisition integrated and performing profitably • 25 new customers won during the year (2005: 17) *Before amortisation of intangible assets, share based payment expense and 2005non-recurring administrative expense. Commenting on the results, Chairman, Christopher Winn, said: "The results reflect 10% growth in gross margin, achieved on increased revenues.This improvement is due to an increase in the proportion of the Group's ownsoftware and services supplied and demonstrates the benefit of IntellectualProperty Rights (IPR) ownership. Our strategy is to develop the Group by a combination of organic growthcomplemented by selective acquisitions. Our primary aim is to continue todeliver shareholder value through a progressive dividend policy which is madepossible by a business model that delivers high levels of profit and cash. Wecontinue to work on bringing a number of acquisition opportunities to fruitionin the coming year We are encouraged by the substantially increased level of sales prospects acrossthe Group and notwithstanding challenges in some of our markets there are clearopportunities, especially within the Multi-Channel Sales sector, and we intendto accelerate the rate of progress over the coming year". Enquiries: Sanderson Group plcChristopher Winn, Executive Chairman Tel: 02476 555466David O'Byrne, Managing Director Tel: 01709 787787Adrian Frost, Finance Director Tel: 01709 787787 Winningtons FinancialPaul Vann Tel: 020 7256 9445 Mob: 07768 807631 SANDERSON GROUP PLC Preliminary Results for the year ended 30 September 2006 CHAIRMAN'S STATEMENT Introduction The Group has adopted International Financial Reporting Standards (IFRS) for thefirst time, and comparative results have been restated accordingly. The tradingresults for the year to 30 September 2006 show turnover of £16.15 million (2005:£15.46 million) and statutory operating profit of £2.17 million (2005: £1.27million). Operating profit before amortisation, non-recurring items and sharebased payment expense amounted to £3.13 million (2005: £2.91 million). Trading Results 2006 2005 £000 £000 Revenue 16,149 15,460Cost of sales (2,607) (3,123) ----------- -------------Gross profit 13,542 12,337Administrative expenses* (10,407) (9,429) ----------- ------------- 3,135 2,908Operating profit*Amortisation of acquisition related intangibles (319) (104)Share based payment expense (642) (458)Non-recurring administrative expenses - (1,076) ----------- -------------Profit before interest and tax 2,174 1,270Net interest expense (275) (708) ----------- -------------Profit before income tax 1,899 562Income tax credit/(expense) 96 (67) ----------- -------------Profit for the year 1,995 495 =========== ============= *Before amortisation of intangible assets, share based payment expense and 2005non-recurring administrative expense. The results reflect 10% growth in gross margin, achieved on an increase inrevenues of 4%. This is due to an increase in the proportion of the Group's ownsoftware and services supplied and demonstrates the benefit of IPR ownership. Wecompleted the acquisition of Sanderson Retail Systems Limited (SRS) in February2006, and the business has made an encouraging contribution to Groupprofitability. The effective rate of corporation tax in the year to September 2006 is less than30% as a result of an overprovision for tax in prior years. Balance Sheet The profile of the balance sheet changed following the acquisition of SRS withdebtors and deferred income increasing as a direct result. Since completing theacquisition, debtor levels have reduced but deferred income remains higher thanat the previous year end due to the long-term nature of some of the SRS customercontracts. Cash generation remains sound and cash generated from operations was 81% ofoperating profit before amortisation and share based payment expense. Net debtof £2.48 million has reduced from the post-acquisition peak of £3.26 million atthe half-year. This low level of debt, combined with undrawn borrowingfacilities, enables the Group to pursue further acquisitions. Dividends The Board is keen to ensure that shareholders benefit from the tradingperformance of the Group through a progressive dividend policy. Subject toapproval at the Annual General Meeting of Shareholders, expected to be held on 6February 2007, a final dividend of 1.5 pence per ordinary share is proposed andwill be paid on 9 March 2007 to shareholders on the register at the close ofbusiness on 9 February 2007. Together with the interim dividend of 1.1 pence perordinary share, this final dividend represents a total dividend for the year of2.6 pence, an increase of 4%. Business Review The Group has established a large client base over many years and has adopted arevenue model based upon retaining and developing clients by continuouslyoffering new products and associated technology, together with professionalservices. Historically, over 50% of annual revenue is derived from recurringlicence, support and maintenance contracts, with approximately 40% of revenuebeing derived from additional products and services supplied to existingclients. New clients account for the remaining 10% of revenue. For the year ended 30 September 2006, recurring revenue continued to grow andrepresented 55% of total revenue compared with 53% last year. 25 new clientswere won in the year, compared with 17 in the previous year and these newclients accounted for 9% of revenue. The average order value from new clientswas around £60,000 with the largest individual client contributing just under£200,000. The reduction in the level of discretionary spend from existingclients in the Manufacturing sector experienced in the previous financial yearcontinued into the current year. The Group's software products are designed to meet all the operational needs ofa broad range of businesses and cover functions such as sales and marketing,finance, human resources, purchasing, production, supply and distribution whilstalso addressing specific requirements such as ingredient handling and callcentre operations. Sanderson owns and develops the IPR to its software productsand licences their use to customers. The Group also provides consultancy services to assist in the set-up,installation and implementation of software in addition to the provision ofgeneral IT advice. Customers also contract for ongoing technical support andmaintenance services. During the year, 72% of Group revenues were generated from the sale of softwareproducts, with the remaining 28% arising from the provision of associatedconsultancy services. This compares to 75% for software and 25% for consultancyduring the previous year and resulted in an increase in gross margin from 80% to84%. The acquisition of SRS provided the opportunity to reposition the Group, whichnow addresses two principal market sectors. Review of Manufacturing The Manufacturing sector accounted for 46% of Group revenue, compared with 60%two years ago. Manufacturing covers the provision of IT solutions to theengineering, plastics, electronics, furniture, automobile parts and printmarkets, as well as specialist solutions for the food industry. Marketconditions continue to be challenging in this sector with discretionary spendlower than in previous years. By focusing on the delivery of our own softwareand services together with strict overhead controls, we have maintained a goodlevel of profitability. The food industry has proved to be an active sector andwe have been successful in gaining five new customers in the year includingSodexho, Nutri-Care, Kingfisher (Brixham) Limited. Review of Multi-Channel Sales This sector accounted for 54% of Group revenue. Multi-Channel Sales addressesthe needs of companies who sell goods via retail outlets, online sales, callcentres, mail order and via distributors. Increasing competition and the rapidgrowth in online sales have encouraged companies to seek efficiency gainsthrough investment in IT, representing a significant opportunity for the Group.New customers gained during the year included Homeserve, Echo, Hayloft Plantsand Help the Aged. The Group is developing a large number of sales opportunitiesin what is proving to be an active market sector and this will be a major focusfor the Group in the coming year. Strategy Our customers continue to focus on the benefits derived from their investment inIT solutions, with efficiency improvements and process re-engineering being keyfactors in their decision to commit to new projects. We believe that the qualityof our products and our development strategy address these key requirements,though the increasing length of the decision-making cycle is now generallyacknowledged to be a feature of the markets in which we operate. Our strategy isto develop the Group by a combination of organic growth complemented byselective acquisitions. Our primary aim is to continue to deliver shareholdervalue through a progressive dividend policy which is made possible by a businessmodel that delivers high levels of profit and cash. We continue to develop anumber of acquisition opportunities for the coming year. Staff We would like to thank our colleagues for their commitment, expertise, andcontinued dedication in working with our customers and partners. Outlook We are encouraged by the substantially increased level of sales prospects acrossthe Group and notwithstanding challenges in some of our markets there are clearopportunities, especially within the Multi-Channel Sales sector, and we intendto accelerate the rate of progress over the coming year. Christopher WinnChairman6 December 2006 Consolidated income statementfor the year ended 30 September 2006 2006 2005 £000 £000 Note Revenue 16,149 15,460Cost of sales (2,607) (3,123) -------- --------Gross Profit 13,542 12,337 Technical and development costs (6,468) (5,433)Administrative expenses (3,590) (3,085)Sales and marketing costs (1,429) (1,473)Other operating income 3 119 -Other operating expenses 4 - (1,076) -------- --------Results from operating activities 2,174 1,270 Results from operating activities before amortisation,share based payment expense and non-recurring expenses 3,135 2,908Amortisation of acquisition related intangibles (319) (104)Share based payment expense 5 (642) (458)Non-recurring administrative expenses - (1,076) -------- --------Results from operating activities 2,174 1,270 Net finance expense 6 (275) (708) -------- --------Profit before tax 1,899 562Taxation 7 96 (67) -------- --------Profit for the year attributable to equity holders ofthe parent 1,995 495 ======== ======== Earnings per share Basic earnings per share 4.8p 1.2p ======== ======== Diluted earnings per share 4.5p 1.1p ======== ======== Consolidated balance sheetat 30 September 2006 2006 2005 £000 £000Non-current assetsIntangible assets 27,051 23,670Property, plant and equipment 585 914Deferred tax assets 488 1,051 -------- -------- 28,124 25,635 -------- -------- Current assetsInventories 258 103Trade and other receivables 4,127 3,788Income tax receivable 211 -Cash and cash equivalents 463 524 -------- -------- 5,059 4,415 -------- -------- Current liabilitiesBank loans and borrowings (528) (760)Trade and other payables (2,351) (3,216)Income tax payable - (455)Deferred income (4,278) (4,050) -------- -------- (7,157) (8,481) -------- -------- Net current liabilities (2,098) (4,066) Total assets less current liabilities 26,026 21,569 Non-current liabilitiesLoans and borrowings (2,420) (1,380)Employee benefits (1,849) (2,480)Deferred consideration (464) -Deferred income (587) - -------- -------- (5,320) (3,860) -------- -------- Net assets 20,706 17,709 ======== ======== Equity attributable to equity holders of the CompanyShare capital 4,181 4,081Share premium 14,578 14,183Shares to be issued 495 -Retained earnings 1,452 (555) -------- --------Total equity 20,706 17,709 ======== ======== Consolidated cash flow statementfor the year ended 30 September 2006 2006 2005 Note £000 £000Cash flows from operating activitiesProfit for the period 1,995 495Adjustments for:Amortisation of intangible assets 319 104Depreciation 160 143Share based payment expense 642 458Net finance expense 297 708Income tax expense (96) 67Profit on disposal of property, plant and equipment (119) - --------- ---------Operating cash flow before changes in workingcapital and provisions 3,198 1,975Movement in trade and other receivables 934 626Movement in inventories (51) -Movement in trade and other payables (1,394) (484)Payments to employee benefit plan (80) (74) --------- ---------Cash generated from operations 2,607 2,043Interest paid (178) (329)Income tax paid (639) (92) --------- ---------Net cash from operating activities 1,790 1,622 --------- --------- Cash flow from investing activitiesInterest received - 28Proceeds from sales of property, plant and equipment 530 -Purchase of plant and equipment (120) (107)Development expenditure capitalised (271) (136)Purchase of intellectual property (200) -Acquisition of subsidiary (1,480) (857) --------- ---------Net cash flow from investing activity (1,541) (1,072) --------- --------- Cash flow from financing activitiesProceeds from issue of shares - 5,795Proceeds from bank borrowing 1,375 2,500Repayment of bank borrowing (625) (5,660)Repayment of external borrowing - (4,000)Repayment of finance lease principal (36) -Equity dividends paid (1,024) (445) --------- ---------Net cash flow from financing activities (310) (1,810) --------- --------- Net decrease in cash and cash equivalents (61) (1,260)Cash and cash equivalents at beginning of year 524 1,784 --------- ---------Cash and cash equivalents at the end of the year 9, 10 463 524 ========= ========= Notes 1 Financial statements The financial information set out herein does not constitute the Group'sstatutory accounts for the year ended 30 September 2006 but is derived fromthose financial statements. The statutory accounts will be finalised on thebasis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the registrar of companiesfollowing the Annual General Meeting. The comparative information in respect ofthe period ended on 30 September 2005 has been derived from the auditedstatutory accounts for the year ended on that date, as restated for the firsttime adoption of International Financial Reporting Standards (IFRS) as referredto below, upon which an unqualified audit opinion was expressed and which didnot contain a statement under section 237 (2) or (3) of the Companies Act 1985.The audited financial statements will be available by contacting the CompanySecretary at the Company's Registered Office. 2 Basis of preparation The financial information has been prepared and approved by the directors inaccordance with IFRS as adopted by the European Union. The first time adoption of IFRS has impacted on the year's results. Theprincipal changes relate to: • acquisition of subsidiaries (treatment of goodwill and intangible assets); • employee benefits (pension scheme accounting); • share based payments; • recording of dividends in the period paid; • treatment of software development in accordance with IAS 38 where certain strict criteria are met. The net impact of the restatement of last year's figures was to increase profitfor the period from a loss for the year of £549,000 to a profit for the year of£495,000. Net assets increased from £16.54 million to £17.71 million. The rules for first time adoption of IFRS are set out in IFRS 1 "First timeadoption of international financial reporting standards". In general, a companyis required to determine its IFRS accounting policies and apply theseretrospectively to determine its opening balance sheet under IFRS. The standardallows a number of exceptions to this general principle to assist companies asthey change to reporting under IFRS. The Group has taken advantage of thefollowing exemptions: • Business combinations that took place prior to the date of transition have not been restated; • At the date of transition, previous UK GAAP valuations have been used as deemed cost for properties; • All cumulative actuarial gains and losses on defined benefit schemes have been recognised in equity at the date of transition. 3 Other operating income Other income represents the net gain arising on the sale of property, plant andequipment (2005: no such income). 4 Other operating expenses No such expenses were incurred in the current year. Other expenses arising in2005 represent the expenses and associated reorganisation costs incurred inrelation to the admission of Sanderson Group plc to AIM on 16 December 2004. 5 Share based payments The Group operates a sharesave scheme, an Inland Revenue approved ExecutiveManagement Incentive plan (EMI), an unapproved share option plan and a Long TermIncentive Plan (LTIP). The share based payment expense represents the fair valueof the cost for the year of these share based payment arrangements to the Group. 6 Net finance expense 2006 2005 £000 £000 Loan note discount - 329Bank facility arrangement fees - 175 ---------- ----------Total non-recurring finance expenses - 504Bank interest payable 154 187Bank interest receivable - (28)Other interest 24 -Net interest on defined benefit pension scheme 75 45obligationsDiscount on deferred cash consideration 22 - ---------- ---------- 275 708 ========== ========== Non-recurring finance expense relates to the capital and debt structure of theCompany in place prior to the admission to AIM on 16 December 2004. 7 Taxation 2006 2005Recognised in the income statement: £000 £000 Current tax expenseUK corporation tax for the current year 600 429Relating to prior periods (515) 38 ---------- ----------Total current tax 85 467 ========== ==========Deferred taxUK deferred tax for the current year (154) 5Relating to prior periods (27) (405) ---------- ----------Total deferred tax (181) (400) ---------- ----------Taxation (credited)/charged to the income statement (96) 67 ========== ========== 8 Dividends 2006 2005 £000 £000 Interim dividend of 1.1p per share, (2005: 1.1p) 452 445Final dividend relating to previous financial year of 1.4p per share (2005: nil) 572 - --------- -----------Total dividend for the financial year 1,024 445 ========= =========== 9 Reconciliation of net cash to net funds 2006 2005 £000 £000 Decrease in cash and cash equivalents (61) (1,260)(Increase)/decrease in debt and finance leases (714) 18,420 --------- ---------- (Decrease)/increase in net funds from cash flows (775) 17,160Finance leases acquired with subsidiary (94) - --------- ----------(Decrease)/increase in net funds (869) 17,160 Net debt at beginning of year (1,616) (18,776) --------- ----------Net debt at end of year (2,485) (1,616) ========= ========== 10 Analysis of net debt At start of Cash flow Arising on At end period acquisition of of period subsidiary £000 £000 £000 £000 Cash 524 (61) - 463 Bank loan:Within one year (760) 260 - (500)After one year (1,380) (1,010) - (2,390)Obligations under finance leases - 36 (94) (58) ------- -------- ------- -------Net debt (1,616) (775) (94) (2,485) ======= ======== ======= ======= This information is provided by RNS The company news service from the London Stock Exchange